Oats out of the horse feed picture

Oats, the only major crop of which the world grows less now than half a century ago, is being muscled out of one of its last remaining strongholds – horse feed – by corn.

While the more than tripling in oats prices between 2005 and 2008 provided a short-term tonic for the grain's remaining growers, it may have cost them dear in the longer term by enticing US horse owners to try out alternatives.

Pelleted corn rations, while "considered to be an inferior feed source for horses… have performed well enough to displace oats", officials at Canada's agriculture ministry, AAFC, said.

And oats "face a difficult time" recapturing the market, with corn-based pellets popular because of their ease of handling, and their production on US horse owner's doorsteps.

One hope for oats, if a less than ideal prospect for farmers, is the grain's eroded premium to corn, which has dropped from more than $60 a tonne in late 2005 to about $18 a tonne and "is expected to remain tight".

Although the prices of the two grains have historically been strongly correlated, corn has gained its recent advantage through demand from ethanol plants, AAFC said in a report.

Alternative uses

Another is for oats to step on corn's toes. PepsiCo scientists have refined an oats-based sweetener, and an alternative to the high fructose corn syrup which has attracted criticism over alleged links to obesity, and been dropped by many drinks brands.

Furthermore, researchers are looking into the development of bread made 100% from oats.

However, at present the grain bears the record as the "only major world crop that has shown a decline in production" between 1960 and 2010.

Most recently, it has lost favour with US growers, thanks to "poor net returns per acre", and Finnish and Swedish farmers, after the European Union in 2006 ditched an oats export subsidy.

The shift has left Canada with an even clearer lead in world exports, with a market share of more than 80%.

Canadian farmers' loyalty to the grain may be rewarded a little this year, but not much.

Chicago oats prices have soared over the last two months over seeding losses to the wet weather in Canada, which the US relies on for a huge chunk of its supplies.

However, AAFC sees Chicago prices averaging, in Canadian dollar terms, Can$170 a tonne on average in 2010-11, only Can$5 higher than in 2009-10.